Alcoa 2015 Annual Report Download - page 89

In 2016, alumina production will be approximately 2,500 kmt lower, mostly due to the curtailment of the Point
Comfort and Suralco refineries. Also, the continued shift towards alumina index and spot pricing is expected to average
85% of third-party smelter-grade alumina shipments. Additionally, net productivity improvements are anticipated.
Primary Metals
2015 2014 2013
Aluminum production (kmt) 2,811 3,125 3,550
Third-party aluminum shipments (kmt) 2,478 2,534 2,801
Alcoa’s average realized price per metric ton of aluminum* $2,069 $2,405 $2,243
Alcoa’s average cost per metric ton of aluminum** $2,064 $2,252 $2,201
Third-party sales $5,591 $6,800 $6,596
Intersegment sales 2,170 2,931 2,621
Total sales $7,761 $9,731 $9,217
ATOI $ 155 $ 594 $ (20)
* Average realized price per metric ton of aluminum includes three elements: a) the underlying base metal component, based on
quoted prices from the LME; b) the regional premium, which represents the incremental price over the base LME component that
is associated with the physical delivery of metal to a particular region (e.g., the Midwest premium for metal sold in the United
States); and c) the product premium, which represents the incremental price for receiving physical metal in a particular shape
(e.g., billet, slab, rod, etc.) or alloy.
**Includes all production-related costs, including raw materials consumed; conversion costs, such as labor, materials, and utilities;
depreciation and amortization; and plant administrative expenses.
This segment represents a portion of Alcoa’s upstream operations and consists of the Company’s worldwide smelting
system. Primary Metals purchases alumina, mostly from the Alumina segment (see Alumina above), from which
primary aluminum is produced and then sold directly to external customers and traders, as well as to Alcoa’s
midstream operations and, to a lesser extent, downstream operations. Results from the sale of aluminum powder, scrap,
and excess energy are also included in this segment, as well as the results of aluminum derivative contracts and buy/
resell activity. Primary aluminum produced by Alcoa and used internally is transferred to other segments at prevailing
market prices. The sale of primary aluminum represents approximately 90% of this segment’s third-party sales. Buy/
resell activity occurs when this segment purchases metal and resells such metal to external customers or the midstream
and downstream operations in order to maximize smelting system efficiency and to meet customer requirements.
Generally, the sales of this segment are transacted in U.S. dollars while costs and expenses of this segment are
transacted in the local currency of the respective operations, which are the U.S. dollar, the euro, the Norwegian kroner,
Icelandic krona, the Canadian dollar, the Brazilian real, and the Australian dollar.
In November 2014, Alcoa completed the sale of an aluminum rod plant located in Bécancour, Québec, Canada to Sural
Laminated Products. This facility takes molten aluminum and shapes it into the form of a rod, which is used by
customers primarily for the transportation of electricity. While owned by Alcoa, the operating results and assets and
liabilities of this plant were included in the Primary Metals segment. In conjunction with this transaction, Alcoa
entered into a multi-year agreement with Sural Laminated Products to supply molten aluminum for the rod plant. The
aluminum rod plant generated sales of approximately $200 in 2013 and, at the time of divestiture, had approximately
60 employees. See Restructuring and Other Charges in Results of Operations above.
In December 2014, Alcoa completed the sale of its 50.33% ownership stake in the Mt. Holly smelter located in Goose
Creek, South Carolina to Century Aluminum Company. While owned by Alcoa, 50.33% of both the operating results
and assets and liabilities related to the smelter were included in the Primary Metals segment. As it relates to Alcoa’s
previous 50.33% ownership stake, the smelter (Alcoa’s share of the capacity was 115 kmt-per-year) generated sales of
approximately $280 in 2013 and, at the time of divestiture, had approximately 250 employees. See Restructuring and
Other Charges in Results of Operations above.
At December 31, 2015, Alcoa had 778 kmt of idle capacity on a base capacity of 3,401 kmt. In 2015, idle capacity
increased 113 kmt compared to 2014, mostly due to the curtailment of 217 kmt combined at a smelter in each the
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